In her book Cash From the Crowd, Sally Outlaw, founder and CEO of crowdfunding website peerbackers, reveals the secrets of funding your business with help from colleagues, peers, family, friends and even perfect strangers through a crowdfunding campaign. In this edited excerpt, the author shares her answers to the questions she hears most often about raising funds through a crowdfunding campaign.
As the founder of a crowdfunding website, I get a lot of general inquiries from users. Here are the top five questions which apply broadly to most campaigns.
1. Can I run a campaign simultaneously on more than one crowdfunding platform?
While most websites don't prohibit you from posting to more than one funding platform at a time, posting on multiple sites can hurt your campaign. The biggest problem is lost momentum, because backers like to see you approaching your financial goal. If a project is posted to more than one website, campaign momentum is diluted as contributors are split among multiple platforms. And, of course, if you're on an "all or nothing" crowdfunding website, you have a bigger chance of not reaching your goal and therefore losing all the funding you do attract.
It can also be confusing for backers and press if you're on more than one platform. To which website are you sending them to learn about and support your project? Better to rally all the social media and hard-earned press exposure around one fundraising initiative. Also, you probably understand the amount of work that will go into promoting, maintaining and updating your campaign while you're fundraising. Refreshing your content, providing updates, adding new videos and perhaps even new rewards all contribute to a successful raise. Given this, how many websites would you really like to manage on a daily basis?
It's better to invest your time preparing, planning for and promoting one robust campaign. Running more than one campaign simply reduces your effectiveness without expanding your reach.
2. Do I have to be a legal entity to post and raise funds?
The answer to this is yes and no. If you are crowdfunding using either donation or reward models, then you don't technically have to be incorporated as a legal entity. These can be good avenues for testing out an idea. However, you would need to be a legal organization to participate in equity and lending crowdfunding. The exception: You could seek a loan on a lending site such as Prosper.com or Lending Club as an individual and then perhaps use the proceeds for a business purpose.
Read more: http://www.entrepreneur.com/article/228460